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Stock May Slump if the Boss
Buys a Pro Sports Franchise

By

E.S. BrowningStaff Reporter of The Wall Street Journal

Updated Jan. 7, 1997 12:01 a.m. ET

The two newest pro football teams, the Carolina Panthers and Jacksonville Jaguars, are rampaging through the playoffs, possibly to the Super Bowl. But their owners' other businesses haven't shown the same kind of winning streaks.

In fact, some money managers believe that if the chief executive of their favorite company starts thinking about buying a pro sports team, they should think about selling the company's stock.

"In general, owning a sports team is more an ego trip than anything else," says Alan Snyder, of Snyder Capital Management in San Francisco. And a look at the results of some of the companies involved suggests that when a CEO or controlling shareholder has a little ego trip on the side, the company's stock may suffer.

Jerry Richardson, the Panthers' principal owner, worked eight years to bring a franchise to Charlotte, N.C., while simultaneously serving as CEO of restaurant group
Flagstar Co
s. In just their second season, the Panthers now have won their division championship, the fastest such success in league history; Sunday they beat last year's Super Bowl winner, the Dallas Cowboys. But Flagstar posted losses for five straight years until Mr. Richardson left in 1995 to devote full attention to the Panthers. And Flagstar's stock still is down 92% since its 1990 listing.

Mr. Richardson, a former wide receiver with the old Baltimore Colts, didn't return phone calls. The football team was hardly the only problem at Flagstar, which faced heavy debt, competitive pressure at its 600 Hardee's franchises and accusations of racial prejudice at its Denny's chain. Flagstar declined to comment.

But a look at eight pro sports teams whose owners are top officials or big shareholders of public companies suggests a worrisome pattern. All but one of the stocks have trailed the market during periods when the executives owned or were negotiating to buy sports teams. For a top executive dealing with business crises, some say, owning a pro sports team can be a distraction.

"There's no question about it," says J. Wayne Weaver, head of the investment group that owns the Jacksonville Jaguars. Mr. Weaver is chairman and the largest shareholder of a retail footwear chain called
Shoe Carnival
, which has seen its stock fall 50% since it was listed in 1993.

"When you get involved in something like the National Football League you spend a lot of time and focus on that," Mr. Weaver says. "Something suffers. I think Shoe Carnival did suffer from my lack of focus."

Mr. Weaver invested in the Jaguars in 1991 as only a limited partner, and only because his brother in Jacksonville needed support. He wound up in 1993 as the principal owner. He moved full-time to Jacksonville and put his offices in the stadium. "I let my emotions escalate and got involved in a much bigger way than I had ever planned," he says, though he insists he has no regrets. Shoe Carnival is based in Evansville, Ind., but Mr. Weaver says he can supervise that and other business activities through advanced communications hookups.

Still, Shoe Carnival began posting losses in fiscal 1995 and fiscal 1996. Mr. Weaver says the product mix had gotten out of step. He changed management and reworked the business plan, and says he hopes to see better results in the next year.

Most pro teams still are owned by families or businessmen who don't head publicly traded companies, and whose business performance is thus harder to measure. The head of the investment groups that own the Chicago Bulls and Chicago White Sox, for example, is Chicago real-estate investor Jerry Reinsdorf.

Lately, however, big sports franchises, especially football teams, seem to be getting bought by people who run big public companies.

At least one purchase provoked lawsuits:
Zapata Corp.
Chairman Malcolm Glazer's acquisition of the NFL's beleaguered Tampa Bay Buccaneers in January 1995 for $192 million was at the time the most ever paid for a football team.

Zapata soon announced plans to sell gas and oil holdings and began moving to buy food-business interests controlled by Mr. Glazer. Some shareholders sued, claiming Mr. Glazer was trying to drain money from Zapata partly to repay loans taken to buy the football team. Zapata dropped plans to purchase Glazer-controlled Houlihan's Restaurant Group after an unfavorable September court ruling.

Mr. Glazer didn't return phone calls. Joseph von Rosenberg, Zapata's general counsel, says Zapata has nothing to do with the Bucs and adds, "We have denied all the allegations and are contesting the suits vigorously." Still, stock in Zapata is down more than 30% since the start of 1994, and has trailed the market since January 1995.

Another prominent sports magnate is Micky Arison, managing general partner of basketball's Miami Heat and CEO of cruise-industry leader
Carnival Corp.
Carnival's stock is up nearly 50% since the Arison family became the Heat's principal owners early in 1995. While Carnival has performed better than some competitors, its stock performance still trails the market, which has gained more than 60% since early 1995.

After extensive local controversy, Mr. Arison in November won a referendum giving him the right to build a new stadium. But he insists that, "other than going to games and watching games, I don't spend a lot of time with the Heat." And he adds, "They have absolutely no impact on Carnival Corp." The cruise company, he notes, has posted regular profit growth.

Could some of the subpar stock performance by these companies be coincidence? That seems to be Mr. Arison's view. At least one team owner has managed to keep his stock performance humming, although he seems to be the exception.

He is H. Wayne Huizenga, principal owner of football's Miami Dolphins, baseball's Florida Marlins and hockey's publicly traded
Florida Panthers
. Despite those interests, he negotiated the well-timed sale of Blockbuster Entertainment and is building a new auto rental and sales empire around Republic Industries. Its stock is up nearly 10-fold since he took charge in 1995.

Sally Anderson, senior portfolio manager at Kopp Investment Advisors in Edina, Minn., says she wouldn't worry too much about team ownership if it seemed just to be a hobby, like owning race horses. "But it is clearly something you would want to monitor," she says. "If he or she were out there all the time in the press with the primary association being the sports team, that would be a red flag."

Those hoping to beat the sports-team curse might want to reflect on some classic cases.

George Steinbrenner, principal owner of the New York Yankees, saw his
American Ship Building
file for Chapter 11 bankruptcy-law protection in Tampa, Fla., in 1993 following a dispute over two oil tankers it was building for the U.S. Navy. As the shipyard's largest shareholder, Mr. Steinbrenner became acting chairman in 1992 following the death of the prior chairman, a former Navy vice admiral. The Tampa shipyard was sold in 1995. Mr. Steinbrenner declined to be interviewed.

New York Jets owner Leon Hess's
Amerada Hess
oil concern has trailed the overall stock market during the past 15 years. An Amerada Hess spokesman said the team and the company "are totally separate."

The small oil exploration company controlled by Houston Oilers owner K.S. "Bud" Adams Jr. also has trailed the market since going public in 1986. Although he has been involved in acrimonious negotiations that led to a decision to move the football team to Nashville, Mr. Adams says he generally spends little time on the Oilers.

Mr. Adams says the oil company long was hurt by a coal investment and he notes that its stock is up sharply in the past year, outperforming other oil exploration companies. "You can co-exist in more than one business and still be in a sporting business too" if you know how to delegate, Mr. Adams insists.

But Mr. Snyder, the San Francisco money manager, says the only way for a company to profit from a sports investment by its senior management is if the company itself is involved in related businesses, such as broadcasting. That permits cross-merchandising, using the team as cheap programming and the station or company to promote the team.

"Ted Turner is the prime example," Mr. Snyder says. "If he hadn't had the Braves, WTBS wouldn't have been the success it was."

Winning at Sports Can Be a Losing Stock Strategy

Team

Principal Owner

Company/position

Stock Performance

FOOTBALL

Carolina Panthers

Jerry Richardson

Flagstar/ was CEO*

Down 92% since 1990

Houston Oilers

K.S. "Bud" Adams

Adams Resources & Energy/ CEO

Trailed market since 1986

Jacksonville Jaguars

J. Wayne Weaver

Shoe Carnival/ Chairman

Down 50% since 1993

Miami Dolphins

H. Wayne Huizenga**

Republic Industries/ CEO

Soared since 1995

New York Jets

Leon Hess

Amerada Hess/ Director***

Trailed market since 1982

Tampa Bay Buccaneers

Malcolm Glazer

Zapata Corp./ Chairman

Down 32% since Jan. 1994. Trailed market since 1995

BASEBALL

New York Yankees

George Steinbrenner

American Ship Building/ Former Chairman

Entered Chapter 11 in 1993, sold assets

BASKETBALL

Miami Heat

Arison family

Carnival Corp./ 48% owners

Trailed market since early1995

* Left company in 1995 ** Also owns baseball's Florida Marlins and hockey's Florida Panthers *** Was CEO until passed job to son in 1995